Lufthansa subsidiary Austrian Airlines reported a 2019 first-quarter net loss of €99 million ($111 million), widened from a €73 million loss in the year-ago quarter.

The company cited higher fuel and maintenance costs, as well as intense competition at its hub at Vienna International Airport, for the loss.

During the quarter, strong competition resulted in an 4% year-over-year (YOY) total revenue to €382 million.

“The first quarter shows a mixed picture. We are happy about the passenger increase of 180,000 additional passengers, but we have effects on the cost and earnings side,” CFO Wolfgang Jani told ATW in Montreal on the sidelines of the carrier’s first flight from Vienna to the Canadian city.

First-quarter expenses were up 3% YOY to €502 million, based on higher fuel and maintenance costs.

“Fuel costs increased 16%; we paid €13 million more compared to 1Q 2018.”

Jani said Austrian was also challenged by two unusual maintenance events. “Our Embraer fleet needed additional engine maintenance. Also, five former airberlin Airbus A320s, which are now in our fleet, had major engine events that resulted in €11 million in higher maintenance costs in the first quarter,” he said.

Austrian’s capacity grew 7% to 5.6 billion ASKs and load factor rose a scant 0.4 percentage points to 73% YOY.

Regarding LCC competition in Vienna, Jani said: “The price war in Vienna has now broken out. We have seen revenue decline on European routes.” However, the Star Alliance member wants to fully counter, because it expects some competitors are disappearing. “We will invest against the LCC competition as long as it is necessary.”

Austrian Airlines transported 2.7 million passengers 1Q, up 7%, mostly related to strong growth on long-haul routes.

Looking ahead, Jani said he has already seen yield improvement for 2Q and 3Q as bookings are strong. However, he expects a challenging year because of LCC competition at Vienna Airport and upcoming aircraft investments. “We anticipate a difficult year overall in 2019. We will continue to be profitable, but considerably below the previous year,” Jani concluded.

Austrian Airlines generated an adjusted EBIT of €83 million in 2018.

Kurt Hofmann, hofmann.aviation@netway.at